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REAL  CAUSE  OF  BUSINESS  STAGNATION  IN  THE 

UNITED  STATES. 


FiY 

HENRY    CAREY    BAIRD, 

AUTHOR   OF 
"  rolitical  Economy,"   '•  lliiin  of  Bad  Ciovcrnnu'iit,"  ••  Credit  System  Wrong,'' 

&c.    Ac,    Ac. 


TO   AN 

ARTICLE  IN  SAINT  JOHN  'TELEGRAPH/' 
JULY  24TII,  1878. 


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REPLY. 


To  THE  Editor  of  "  The  Da  fly  Telegraph." 
Sir, 

111  your  paper  of  24th  July  I  find  tlic  following : — 

"Tlie  dullest  luinds  can,  Jiowever,  realize  what  would  be  the  efTect 
of  a  score  or  two  of  Coldbrook  iron  works  instead  of  one.  They  can 
understand  how  Protection  operated  on  similar  works  in  the  United 
States.  Statistics  show  that  on  the  31st  of  December  bust,  of  the  716 
iron  furnaces  in  that  country  only  270  were  in  blast,  440  bein^ 
closed.  Of  32  furnaces  in  Michigan,  only  9  were  in  blast;  of  33  in 
V^irginia,  only  5  were  in  blast ;  and  of  7  in  North  Carolina,  all  were 
silent.  Of  Pennsylvania's  278  furnaces,  J  47  were  out  of  blast.  The 
})roductive  capacity  of  the  blast  furnaces  now  in  the  United  States  is 
about  4,000,000  tons,  and  this  is  about  ten  times  as  much  as  the 
country  re<piires.  It  is  almost  unnecessary  to  add  that  in  no  })art  of 
this  continent  is  there  so  much  distress,  want  and  misery  as  amcmg 
the  employees  in  the  highly  protected  iron,  coal,  and  other  indus- 
tries of  the  United  States.  The  same  system  has  all  but  annihilated 
the  shipping  of  the  United  States,  and  nearly  driven  the  Hag  of  tliat 
country  from  the  steam  tonnage  now  traversing  all  the  great  oceans." 

Permit  me  to  reply  to  the  foregoing. 

The  position  you  here  take  in  regard  to  the  effects  of 
protection  in  the  United  States — that  of  post  hoc  j^'ojytcr 
hoc — is  hardly  a  logical  one,  and  you  might  with  perfect 
propriety  be  called  upon  for  proof  that  the  condition  in 
which  our  industries  at  present  stand,  and  the  policy  oi' 
protection,  bear  the  relation  to  each  other  of  effect  and 
cause.  It  may  be  claimed  with  equal  force  and  fairness, 
that  free  trade  is  the  cause  of  the  prostrate  condition  of  the 
'ron  and  coal  industries  of  Great  Britain,  for  certain  it  is 
that  there  is  there  entire  free  foreign  trade;  ami  we  are 
assured  by  Messrs.  W.  Fallows  (fe  Co.  of  Liverpool,  that 

"The  history  of  the  iron  trade  in  1877  is  one  continual  chronicle 
of  depression,   unrelieved  by  any  silver  lining  to  that  dark  cloud 

which  has  himg  over  it  for  the  last  three  years Wages 

have  been  reduced  to  such  an  extent  that,  coupled  with  the  limited 
demand  for  lal)or,  tlic  iron  workers,  even  in  the  best  districts,  have 
been  barely  able  to  earn  a  living,  wlkilst  in  some  quarters  there  is 
iwsitive  destitution  and  poverty.  This  depression  is  mainly  trace- 
able to  two  causes — over  production  and  forcif/n  competition." 


Then  the  circular  of  C.  E.  MuUcr,  Middleboroiigli,  says: 
"  The  iron  rail  trade  is  slowly  dying." 

The  Secretary  of  the  Britisli  Iron  Trade  Association  says : 

"For  a  period  now  approaching,  if  not  actually  cxtontling  over 
three  years,  the  metallic  trades  of  this  country  liave  heen  parsing 
through  an  ordeal  a?  severe  and  as  prolonged  as  any  that  living 

memory  can  recall Some  doi)artmonts  of  the  iron  Iradf 

have  been  seriously  prostrated  by  the  loss  of  certain  markets  in 
which  we  had  formerly  been  all  but  monopolists,  and  notably,  the 
markets  of  tlie  United  States." 

Regarding  the  coal  trade  of  1877,  the  same  author  says  : 

"  Coal  owners  have  found  the  past  year  one  of  great  anxiety  and 
loss.  No  trade  lia.s  been  so  seriously  embarrassed,  and  no  industry 
has  so  greatly  declined.  Every  evii  and  vicissitude  that  could  tend 
to  make  the  trade  ruinous  appears  to  have  been  heaped  ujwn  it,  until 
the  pressure  has  become  well  nigh  intoleral/le." 

To  this,  adds  the  Secretary  of  the  American  Iron  and 
Steel  Association  in  his  Report  dated  July  15,  1878 : 

**  All  the  advices  we  have  received  since  the  close  of  1877,  rejirc- 
sent  the  prostration  of  British  industries  to  liave  been  greater  tluis 
far  in  1878  than  in  1877." 

According  to  the  London  Times  of  Decend)er  30,  1877, 
the  condition  of  things  in  the  iron  and  coal  districts  of 
AVales  is  something  appalling,  and  heart-rending  in  the 
extreme.     It  is  there  stated,  that 

"At  the  Cardiif  Docks  there  are  now  miles  of  laden  coal  wagons 
waiting  for  shipment At  Cardiff',  owing  to  the  large  in- 
crease in  the  number  of  able  bodied  men  applying  for  relief,  the 
Guardians  have  been  compelled,  in  consequence  of  the  workhouse 
being  crowded,  to  open  a  stone  yard  for  the  employment  of  married 
men,  and  the  apj)licants  are  increasing  at  the  rate  of  about  fifty  a 

wOek Last  week,  a  family  consisting  of  seven  persons 

was  found  to  have  subsisted  for  days  on  a  jiailful  of  brewers'  grains, 

which  were  intended  for  some  pigs At  Merthyr,  the 

Vicar  hopes  to  open  in  a  few  days  the  drill-hall,  where  the  children 
will  receive  one  meal  a  day.  During  1875,  lie  fed  in  this  way  5000 
children  daily,  and  there  are  many  hundreds  more  now  in  a  state  of 
semi  starvation,  who  crowd  along  the  streets  ev^ery  morning,  turning 
over  *he  dust  boxes  and  refuse,  to  pick  np  anything  of  the  nature  of 
food.  So  deeply  is  the  distress  felt  outside  the  wovklionse,  that  the 
(ruardians  of  the  Crickhowel  Union  have  resolved  not  to  give  the 
inmates  of  the  Avorkhousc  their  usual  Christmas  dinner,  as  manv  bun- 


5 

drccis  of  tradesmen  and  niechauiw*,  who  pay  rates,  are  unable  to  pro- 
vide a  Christmas  dinner  for  themselves.  Mr.  Hraehan,  the  Poor  Law 
Inspector  for  the  distriet,  is  now  on  a  visit  to  Honth  Wales,  to  advise 
the  Guardians  on  the  hest  mode  of  meeting  the  demand  for  work- 
liouse  acconnnodation  and  outside  relief,  and  he  lias  advised  the 
erection  at  once  of  temi)orary  iron  sheds  in  all  cases  where  the  work- 
houses are  filled." 

Will  you  now  kindl)^  inform  me,  Mr.  Editor,  how  the  fore- 
going statements  harmonize  with  your  view  that  protection 
has  caused  the  ruin  of  our  industries  ?  Can  it  be  possible 
that  in  one  country  a  result  has  been  brought  about  by  this 
])olicy,  and  in  another  that  the  same  result  has  been  pro- 
(luced  by  a  diametrically  opposite  one? 

Further,  you  say,  "  The  productive  capacity  of  the  blast 
furnaces  now  in  the  United  States  is  about  4,000,000  tons, 
and  this  is  about  ten  times  as  much  as  the  country  needs." 
According  to  the  Keport  of  the  Secretary  of  the  American 
Iron  and  Steel  Association,  the  production  of  pig  iron 
ill  1877  was  2,314,585  net  tons,  and  the  consumption 
2,418,216  net  tons,  or  more  than  six  times  your  estimate  of 
the  needs  of  the  country  !  While  too  the  stock  of  pig  iron 
on  hand  in  tlie  United  States  had  declined  from  686,798 
net  tons  in  December  1876  to  642,351  net  tons  in  Decem- 
ber 1877,  the  stock  in  Scotland  and  the  north  of  England 
had  risen  from  545,541  gross  tons  in  1876  to  809,797  gross 
tons  in  1877.  A  production  of  400,000  tons  would  be 
inadequate  to  tlie  production  of  our  Bessemer  steel,  now 
amounting  to  560,000  tons  j^er  annum,  against  750,000 
tons  in  Great  Britain  ;  and  it  pays  its  producers  too. 

As  regards  our  shipping,  and  es})ecially  that  of  steam, 
it  should  be  said,  our  difficulties,  so  far  from  being  due  to 
protection,  are  to  be  attributed  rather  to  the  absence  of  that 
protection  which  Great  Britain  has  so  liberally  given  to  her 
own  steam  marine  in  the  form  of  subsidies  for  mail  service 
during  nearly  forty  years.  But,  in  spite  of  this  .illiberal 
and  ill  advised  policy  of  the  Government  of  the  United 
States,  we  have  542  steamers  of  674,036  tons,  out  of  a  total 
of  5,471  steamers  of  5,510,816  tons  in  the  entire  world,  and 
we  have  jiow  far  more  steamers  engaged  in  foreign  trade 
than  we  had  in  1860  during  free  trade.  But  is  there,  let 
me  ask,  any  other  branch  of  trade  in  Great  Britain  to-day 


6 

whicli  is  ill  a  more  ruinous  state  of  (Icpression  fliid  decay 
tliau  that  of  steam  nliipping?     I  believe  not. 

We  now  conic  to  a  consideration  of  tlie  real  cause  of  the 
l)usiness  depression  in  the  United  States,  It  will  be  found 
always  and  solely  in  the  coniraeiion  of  the  currency.  At  the 
close  of  the  war  in  1865,  there  were  outstanding,  of  legal 
tender  money,  bank  notes,  and  that  which  served  as  bank 
reserve,  over  $1,900,000,000,  while  to-day  there  are  but 
abont  Sfi50,000,000.  The  effect  of  this  contraction,  which 
was  commenced  in  186(),  soon  began  to  l)e  felt  upon  ])usi- 
ness  and  our  productive  industries,  and  by  18H<S  it  had 
])ut  a  stop  to  almost  every  description  of  new  enterjuvise. 
However,  there  was  one  branch  of  business  which  need  not 
be  stopped,  as  it  could  be  fed  by  the  proceeds  of  bonds 
sold  in  Europe,  and  tiiat  was  raih-oad  building.  This  com- 
menced in  earnest  in  18()7,  and  the  result  is,  we  have  more 
than  doubled  the  number  of  miles  in  operation  between 
1807  and  1877,  they  having  run  up  from  89,250  in  the  for- 
mer year  to  79,208  in  the  latter.  Hence  the  stimulation  of 
the  iron  business  and  all  others  which  ministered  to  rail- 
roading, out  of  harmony  with  others.  The  result  is,  that 
these  are  more  depressed  than  probably  any  others  in  the 
country. 

That  our  present  depression  is  owing  to  contraction,  there 
is  a  great  and  steadily  growing  body  of  our  people  fully 
convinced  of,  and  that  the  oppo.sife  policy^  of  e.rpaimon,%mll 
prevail,  is  the  mod  certain  event  in,  the  future  hidory  of  this 
country.  The  ])eo|)le  are  rapidly  learning  that  an  inade- 
quate supply  of  money  means  an  inflation  of  credit,  to  end 
in  a  financial  crisis,  'iliey  have  seen  its  effect  in  Great 
Britain,  with  its  crises  of  1825,  1887,  1847,  1857,  1866, 
1875,  and  they  have  studied  with  an  intense  and  absorbing 
interest,  the  more  than  marvellous  stcn'v  of  the  industrial 
and  financial  triumphs  of  France  from  1871  to  1878,  after 
seventy-five  years  of  [)ersistent  protection,  and  with  the 
largest  volume  of  money  in  use  by  such  a  t)opulation  in  the 
world  to-dav— $2,200,000,000  of  gold,  silver,  and  paper 
money  for  86,000,000  of  people!  and  if  there  be  anything 
more  sure  than  another  in  i\\i)  future  of  the  p.oople  of  tiiis 
country  it  is,  that  they  mean  to  have  done  with  UU  inflated 


hank,  pcrson»al  aiul  corporate  credit  system, an  a  substitute  for 
"current  money  of  the  realm."  While  the  believers  in  the 
dogmas  of  English  jiolitical  economy, the  "dismal  science" 
of  Carlyle,  tlie  science  based  on  the  assumptions  of  Mill,  are 
speculating  about  "  over  production"  amid  a  starving  peo- 
l)le,  as  a  cause  of  depression,  our  j)eople  arc  at  work  organ- 
izing a  victory  for  the  amelioration  of  mankind  such  as  has 
no  parallel  in  the  annals  of  the  world.  I  liesitate  not  to 
affirm  that  never  before  was  there  a  i)eople  who  had  gotten 
such  a  firm  grip  upon  true,  sound,  living  economic  doc- 
trines, as  well  as  to  tariffs  as  to  money,  commerce,  trade, 
and  labor,  as  this  people  has  to-day.  I  earnestly  invite 
you,  as  well  as  your  readers,  to  study  and  watch  this  grand 
movement  and  its  outcome,  as  one  of  the  most  interesting 
in  the  history  of  the  human  race.  Our  ])eople  arc  weary 
of  the  life  of  brutalization,  starvation  and  misery,  which 
they  have  seen  to  be  the  lot  of  the  mass  of  the  workers, — 
the  wealth  i)roduccrs,  of  all  time,  jiud  of  every  clime ;  and 
they  now  mean  to  reform  this  great  wrong,  and  bring  about 
the  greatest  moral  revolution  ever  yet  accomplished,  a7id 
they  ivill  do  it.  The  overthrow  of  African  slavery  in  this 
country  was  nothing  to  the  overthrow  of  the  slavery  of 
whites  and  blacks,  arising  out  of  a  monopoly  of  money,  the 
instrument  of  association  and  distribution,  which  this  people 
is  jn-eparing  to  accomplish,  and  will  make  complete  and 
overwhelming. 

HENKY  CAKEY  BAIRD. 

Philadclplim,  July  29,  1878. 


